POSITIONED TO LEAD IN A GROWING MARKET - THE #1 WIRELESS HAULING SPECIALIST Investor Presentation // May 2020
←
→
Page content transcription
If your browser does not render page correctly, please read the page content below
THE #1 WIRELESS HAULING SPECIALIST
POSITIONED TO LEAD IN A GROWING MARKET
Investor Presentation // May 2020
Proprietary and Confidential
Safe Harbor This presentation contains statements concerning Ceragon's future prospects that are "forward-looking statements" within the meaning of the Securities Act of 1933 and the Securities Exchange Act of 1934, as amended, and the safe-harbor provisions of the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are based on the current beliefs, expectations and assumptions of Ceragon's management about Ceragon’s business, financial condition, results of operations, micro and macro market trends and other issues addressed or reflected therein. Examples of forward-looking statements include: projections of demand, revenues, net income, gross margin, capital expenditures and liquidity, competitive pressures, order timing, growth prospects, product development, financial resources, cost savings and other financial matters. You may identify these and other forward-looking statements by the use of words such as "may", "plans", "anticipates", "believes", "estimates", "targets", "expects", "intends", "potential" or the negative of such terms, or other comparable terminology. These forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially, including the risk of a disruption to our and our customers’ business related to the outbreak of the novel coronavirus (COVID-19) pandemic (“Coronavirus”); the risk of macro-economic downturn and slowdown of development and significant decline of business that can harm our and our customers’ ability to conduct or further develop our/their business, including, cancellation, suspension or reduction in the investment in new equipment purchases, postponement or cancellation of rollout of wireless networks, postponement in the transition to 5G technologies and in the introduction of new products and capabilities, inability to deliver and perform under our contracts, disruption to our supply chain and production capacity, adverse effect on our and our customers’ financial performance, cash flow, revenue and financial results, available cash and financing, and our ability to bill and collect amounts due from our customers; the risks relating to the concentration of a significant portion of Ceragon's expected business in certain countries and particularly in India, where a small number of customers are expected to represent a significant portion of our revenues, including the risks of deviations from our expectations of timing and size of orders from these customers; the risk of delays in converting design wins into revenue as well as the expected revenue growth; risks associated with any failure to meet our product development timetable and specifications and to maintain our technological advantage over our competitors; risks associated with any failure to effectively compete with other wireless equipment providers; the risk that the rollout of 5G services could take longer or differently than anticipated; and other risks and uncertainties detailed from time to time in Ceragon's Annual Report on Form 20-F, Item 3, under the caption “Risk Factors”, and Ceragon's other filings with the Securities and Exchange Commission, that represent our views only as of the date they are made and should not be relied upon as representing our views as of any subsequent date. Such forward-looking statements do not purport to be predictions of future events or circumstances, and therefore, there can be no assurance that any forward-looking statement contained in our announcements, presentations, or commentary will prove to be accurate. We do not assume any obligation to update any forward-looking statements. Proprietary and Confidential 2
Ceragon at a glance
INNOVATIVE, MARKET LEADER GLOBAL COMPANY
4G & 5G NETWORK ENABLER COMPANY SNAPSHOT
Strong technology advantage Significant activity in each region
• First to market
• Design to cost
+2,000 TOTAL CUSTOMERS
BEST-OF-BREED MARKET SEGMENT REVENUE - 2019 +1M SYSTEMS DEPLOYED
COUNTRIES WITH
Other
Ceragon, 15%
+140 SYSTEMS DEPLOYED
17% % of revenue
Last 12 months BALANCED REVENUE MIX
30 EMPLOYEES
Nokia
Huawei
1,000+ GLOBALLY
6% 25
15%
Intracom 20
7%
15 $0.99-$4.11 52 WEEK LOW/HIGH(A)
Ericsson NEC 10
8% 14% 5
Aviat SIAE
9% 9% 0
Europe Africa North India APAC Latin
Source: Ceragon analysis based on Skylight research, 2020. America America
*Others include vendors with less than 2% share (A) Source: Nasdaq as of 4/29/2020
Proprietary and Confidential 3
Investment highlights
Positioned to lead in a growing segment of a growing market
POSITIONED A GROWING SEGMENT
TO LEAD OF A GROWING MARKET
• Leading wireless hauling specialist – well positioned • Market growth driven by 5G opportunities for
to take market share service providers
• Unique technology, extensive services, global • Best-of-breed market segment becomes more
presence – creating value for our customers dominant in the 5G world
• Financial and business resilience Microwave & millimeter-wave global revenues forecast
3,600
• Uninterrupted fulfillment
3,500
• Anytime-anywhere service
3,400
USD Millions
3,300
3,200
3,100
3,000
2019 2020 2021 2022 2023 2024
Source: Dell’Oro – 2020
Proprietary and Confidential 4
COVID-19 is expected to accelerate market growth
Broadband: the new essential utility
• Telecom and broadband services are
the new lifeline
• There is a substantial surge in network
capacity demand
• Some service providers are taking action
to ramp up their network infrastructure
• 5G use-cases are becoming a reality –
even sooner than anticipated
• Already driving increased demand for
Ceragon’s leading wireless hauling solutions
and services
Proprietary and Confidential 5What is wireless hauling?
Critical technology for 4G and 5G networks
WIRELESS HAULING – AN ALTERNATIVE TO FIBER DEPLOYMENT,
AN ESSENTIAL PART OF ANY NETWORK EVOLUTION FOR FASTER AND MORE COST-EFFECTIVE DEPLOYMENTS
Connects approximately 50% of all cell sites globally (current & forecasted)
Proprietary and Confidential 6Leader in the growing best-of-breed segment
• Service providers seeking the best wireless hauling solution as primary factor in their vendor selection
• Increasing importance in 5G
BEST-OF-BREED MARKET SEGMENT REVENUE - 2019
USD [M]
4000 Other Ceragon, 15%
17%
3500
3000
2500 1720 Nokia
Best-of-breed 6% Huawei
2000 $1.73B 15%
1500 1720 Intracom
7%
1000 Bundled deals
500 $1.44B
Ericsson NEC
0
8% 14%
Aviat
9% SIAE
9%
Source: Ceragon analysis based on Skylight research. March 2020
*Others include vendors with less than 2% share
Proprietary and Confidential 7The growing 5G market
5G EXPECTED TO CREATE OPPORTUNITIES FOR SERVICE PROVIDERS
New revenue streams via new service offerings & additional target markets
5G to drive growth Combined with Accelerating deployment
in number of connections significant growth in traffic of new cell sites
GLOBAL MOBILE DATA TRAFFIC (EB PER MONTH) GLOBAL CELL SITES (000'S)
20,000 3,000
15,000
2,000
10,000
1,000
5,000
0 0
2016 2017 2018 2019 2020 2021 2022 2023 2024
Total cell sites - commulative (000's)
New sites per year (000's)
Source: GSMA Intelligence, 2019 Source: Ericsson, 2019 Source: Dell’Oro – 2020
Proprietary and Confidential 8The growing 5G market
5G EXPECTED TO CREATE OPPORTUNITIES FOR SERVICE PROVIDERS
New revenue streams via new service offerings & additional target markets
5G to drive growth Combined with Accelerating deployment
in number of connections significant growth in traffic of new cell sites
TO CREATE MASSIVE DEMAND FOR OUR SOLUTIONS
• Solutions that resolve 5G challenges, such as capacity (video calling - zoom), latency, scale of deployment
• Solutions that are fast and cost-efficient to deploy, optimally answering the need for more cell sites
COVID-19 CHANGES BEHAVIOR TO ACCELERATE DEPLOYMENT
Proprietary and Confidential 95G operator opportunities drive market growth
Creating network challenges of a different scale than in 4G
differentiated
service for
WFH
Grow Profitability & Market Share New revenue streams
GOAL Increase Competitiveness TOOLS via 5G services launch
NETWORK New New New
TRENDS Services Network Architectures Cellular Spectrum
NETWORK
CHALLENGES
PROVIDE REDUCE NETWORK SLICING DEPLOY
Proprietary and Confidential MORE CAPACITY LATENCY FOR SERVICE ORCHESTRATION MORE SITES 10Ceragon enables operators to unlock their 5G potential
With flexible wireless hauling
HIGHEST DISAGGREGATED SOFTWARE
INDUSTRY CAPACITY WIRELESS HAULING DEFINED NETWORKING
Network Orchestrator
CAPACITY SDN APPS
100Gbps Hierarchical Controller
40Gbps
SDNMASTER
Radio Wireless hauling
20Gbps domain controller
Networking SoftwareCeragon positioned to lead in the growing 4G & 5G markets
Unique technology position Leaders Leaders in open network
through vertical integration in All-Outdoor via disaggregated wireless hauling
• First-to-market advantage – • A growing segment, • Faster time-to-market for new 5G services
100Gbps over the air! best suited for 5G new-site deployment, • Network optimization
• Design-to-cost advantage reducing site-acquisition effort • Network & operations simplification
• Best fit for 5G sites. • Aligned with the Open-RAN vision
TURNKEY
Others
SERVICES Nokia 10%
5%
Ericsson
SYSTEMS 6% Ceragon Radio
36%
Networking
HARDWARE Software
DESIGN Intracom
20% Networking
SOFTWARE Hardware
DESIGN
Huawei
CHIP DESIGN 23%
2019 ALL-OUTDOOR UNIT MARKET SHARE
END-TO-END VERTICAL INTEGRATION
Source: SkyLight Research. March 2020
*Others include vendors with less than 2% share
Proprietary and Confidential 12FINANCIALS Proprietary and Confidential 13
Track record of execution
• Consistently profitable during 2015-2018 (Revenue) (in millions) (Net Income)
$400 $40
371
• 2019 results negatively impacted by lower Revenue 349 344
$350 332 $30
from India as well as one-time items of $3.3 million
294 286
$300
• Focus on maximizing gross profit dollars 17.5
$20
$250 15.3
• Q1 bookings exceptionally strong 11.5 $10
7.4
$200
(book-to-bill well above 1)
0.1 $0
• India returns as a major target market $150
(a) -$10
• Q1 2020: revenues negatively impacted by COVID- $100
19. Trend expected to continue in Q2. $50 -$20
(25.2)
• Supply chain disruptions and overall uncertainty $0 -$30
2014 2015 2016 2017 2018 2019
temper long-term optimism
Revenue Non-GAAP Net Income
Note: Financial metrics are presented on a non-GAAP basis.
Proprietary and Confidential 14Strong balance sheet
• Positioned to weather challenges (U.S. dollars in millions)
(Unaudited)
• Short-term bank debt: >$7.1 million unused
a/o March 31, 2020
borrowing capacity
• Credit facility is used as a business tool to Cash & cash equivalents 44.1
accommodate short-term increase in working
Bank debt 32.9
capital needs
Inventory 59.7
AR 104.2
DSOs 140
Proprietary and Confidential 15Characteristics of operating model
Good management of controllable elements
Quarterly Operating Model
• Deals accepted based on contribution to gross profit dollars
110 40%
• Tendency toward trade-off between revenue and gross margin 100
90 35%
• Stringent control of operating expenses
80
30%
70
Quarter-to-quarter fluctuations due to nature of business 60
25%
• Geographic mix of revenues 50
40
• Shifts in local regulations and market environment 20%
30
• Timing of revenue recognition for elements of each project 20 15%
depends on equipment delivery schedules 10
0 10%
• Also: currency fluctuations, interest rates, seasonality, order
Q2:15
Q3:15
Q4:15
Q1:16
Q2:16
Q3:16
Q4:16
Q1:17
Q2:17
Q3:17
Q4:17
Q1:18
Q2:18
Q3:18
Q4:18
Q1:19
Q2:19
Q3:19
Q4:19
Q1:20
lumpiness, changes in raw material and component costs
Gross profit Revenue Gross margin Opex
• Q1 low gross-margin driven by low revenue as well as less
favorable geographical mix Note: Financial metrics are presented on a non-GAAP basis.
Proprietary and Confidential 16SUMMARY Proprietary and Confidential 17
Investment highlights
+ Leading player in market in which growth is expected to accelerate by the current environment
+ Differentiated, technologically-advanced platforms that give operators a time-to-market,
flexibility and capacity advantage
+ Competitive strengths position us to obtain major share of highest-value opportunities and to
gain overall market share
+ Financial stability enables continuous innovation and design-to-cost investment
+ 2020 started with strong bookings in Q1 from multiple 2019 design wins and new COVID-19
driven interest
+ Positioned to capitalize on accelerated, multi-year evolution to 5G
Proprietary and Confidential 18THE #1 WIRELESS HAULING SPECIALIST Proprietary and Confidential
You can also read
